China's welfare success up for debate

Until a few months ago, 10-year-old Zhao Ai went hungry from dawn to dusk, despite the two-hour trek between his mountain home and school. Now he enjoys a free lunch with classmates.

Like tens of millions of households in China, his family are farmers who live on the meagre profits from the crops they can spare and wages sent back by relatives working in cities.
In a land now dotted with skyscrapers and designer stores, they are scraping by in one of the poorest areas, a remote part of southwestern Guizhou province. Yet, in the past decade, a string of measures have offered some relief: the abolition of agricultural tax and tuition fees, the rolling out of medical insurance that reimburses most of their bills, a 55-yuan monthly pension for Zhao's grandfather and now school lunches.

As China prepares for its leadership transition, state media hail a "golden decade" under the incumbents. Critics call it a lost decade, rife with wasted opportunities for the economic, social and political reform the country needs. They say Chinese premier Hu Jintao and his predecessor Wen Jiabao have maintained high growth – not an insignificant achievement, given the wider global economic woes – but failed to tackle the problems now accumulating thanks to that model.

Yet others believe that, for all the disappointments, the administration is leaving behind what could yet prove to be a significant political legacy: building the skeleton of a welfare state and attempting to put a net below those at the bottom of society.

In the beginning, the social-insurance programme targeted urban workers, but it gradually extended to migrant workers and introduced rural medical insurance and pension programmes. A decade ago, 147-million urban employees and 55-million rural residents had pension coverage. Now 229-million urban employees are covered and 449-million rural and urban residents; 124-million are already receiving payments. A few years ago, barely 20% of rural dwellers had medical insurance; now 96% of the population is covered.

Miserable and stingy
Although inequality has soared over the past decade – the gap between town and country has expanded and rural dwellers enjoy less than a third of average urban incomes on official measures and perhaps as little as a fifth, according to experts – research by Tony Saich of Harvard University found that satisfaction with the government had actually gone up between 2003 and 2011. "That's where things like the dibao [a subsidy for the poorest] and some kind of medical insurance have improved the view," Saich said.

The significance of Hu and Wen's legacy will depend on how their successors build upon it. "The whole programme remains miserable and very, very stingy," said Dorothy Solinger of the University of California Irvine, an expert on the dibao. The urban expansion of the dibao was made under the previous leaders, she noted, and the urban poverty line – which is set in each city – worked out nationally at 15% of urban average disposable income last year, down from the high 20s a decade ago.

Even at existing payment levels there are obvious problems. For example, the pensions of current retirees were being paid by new workers, said David Kelly, research director of Beijing-based consultancy China Policy, and the demographics of China's rapidly ageing population were working against the system.

Corruption and incompetence need to be tackled to ensure funds reach intended beneficiaries.

Many also believe that creating a proper welfare state will require a long-awaited overhaul of the hukou, the household registration system that defines people as urban or rural and allocates their rights to services accordingly. "It's the hardest thing to touch because it involves popular sentiment. City dwellers don't want a wave of people coming to share their benefits," said Kelly.